Japanese yen, Swiss franc trade high over US slowdown fears

Japanese yen and Swiss franc traded near multi-month highs

The safe-haven Japanese yen and Swiss franc traded near multi-month highs against the dollar on August 2 after an unexpected slump in US manufacturing fuelled fears of a downturn, sending stocks and bond yields tumbling.

The yen traded around 0.2 percent stronger at 149.085 per dollar after popping as high as 148.51 overnight for the first time since mid-March. The franc edged to its highest since early February at 0.8726 to a dollar.

They were the only two major currencies to outperform the dollar overnight.

The Institute for Supply Management (ISM) said that US manufacturing PMI dropped to 46.8 last month, the lowest reading since November, from 48.5 in June.

Sterling languished at a one-month low after plunging almost a percent overnight as the Bank of England kicked off its interest-rate cutting cycle in a finely balanced decision. The euro also sagged following dovish comments from the European Central Bank.

The Australian dollar declined 0.14 percent to $0.6493, extending the previous session's 0.52 percent slide.

Megacaps led a Wall Street selloff on August 1 that reverberated in Asia, with Japan's Nikkei plunging more than 4 percent and South Korea's Kospi tumbling 2.5 percent.

US 10-year Treasury yields plunged 14 basis points to 3.965 percent overnight, breaching the psychological 4 percent barrier for the first time in six months.

"There was nowhere to hide overnight as dour economic data fuelled hard landing fears," said Tony Sycamore, a markets analyst, as per a Reuters report.

The US economic outlook faces a crucial test on August 2, with the release of monthly payroll figures and in the event of a weak result, "worries around a hard landing will intensify, as will calls for a 50-basis-point rate cut in September," Sycamore said.

The euro declined 0.07 percent to $1.07845, after reaching a three-week low of $1.07775 overnight.

With agency inputs